Govt norms ensure no one makes money in payments space: Axis Bank head

"What the govt is doing is that they're taking out the entire P&L (profit and loss) opportunity for us. So if you look at the payments space, no one can make any money in the country at all", he said

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Private sector lender Axis Bank on Wednesday said government mandates on the payments space ensure that no one can make money in the segment.

The bank's chief executive and managing director Amitabh Chaudhry feared that smaller entities will not be able to survive amid such diktats.

The comments from Axis Bank, which also runs the payments company Freecharge, come amid a debate on whether merchant discount rate (MDR) should be levied on the very popular UPI platform. The government, which wants to popularise digital payments, has been insisting that no charges should be levied.

"What the government is doing is that they're taking out the entire P&L (profit and loss) opportunity for us. So if you look at the payments space, no one can make any money in the country at all. You have to use payments as a platform to make money somewhere else," Chaudhry said at the Global Fintech Fest here.

The worry is that more and more of such demands will emerge, which will take away revenue and profitability pools and then only the big entities can survive and small players will struggle, he added.

The challenges emanating from regulatory and governmental mandates are not limited to payments alone, he said, pointing to difficulties with priority sector lending (PSL) requirements.

"The regulators do ask banks to do a lot of the things which don't make money for us, even though they fully understand that they need to allow us to do something where we make money to fund lot of areas where we don't make money," he said.

For instance, Chaudhry said, commercial banks have a 40 per cent PSL requirement, which has 15 sub-sections. A lot of those areas do not make money at all.

Axis Bank spends Rs 900 crore just buying PSL certificates every year to meet the PSL lending norms, he said.

Given such a regulatory environment, he said, the way forward lies in partnerships with big tech companies. He said his bank has already sewed up such partnerships with Flipkart and Google and will have one more stitched up shortly.

The next few years will see many such partnerships across products, which makes it a win-win for all parties involved, he added.